Banks continue to fail small businesses

Banks are continuing to fail small businesses, despite the launch of the Business Finance Taskforce last year.

The Business Finance Taskforce was set up by the British Bankers' Association (BBA), and committed participating banks to 17 actions in three broad areas, including ensuring better access to finance.

However, new research from the Forum of Private Business suggests that it has not yet achieved its aim of repairing the relationship between banks and small businesses.

In a survey of small business owners on the Forum's cash flow and finance panel, 24 per cent have called for more choice between 'traditional' banking services, while 21 per cent want better access to alternative forms of funding.

In total, 26 per cent of respondents are seeking out alternative financial products. Commenting, Alex Jackman, senior policy adviser at the Forum said: "The Business Finance Taskforce produced 18 recommendations, some of which have been extremely useful - particularly in the areas of mentoring, lending appeals, finance readiness and funding for high-growth enterprises,"

"But the verdict so far is that much more needs to be done to get cost-effective finance to the businesses that need it most.

"There is falling demand from small firms but that does not mean a lack of need for affordable funding. It reflects just how alienated entrepreneurs are by the restrictive risk criteria and steep costs being imposed by mainstream lenders. As a result, there are increasing signs business owners are looking elsewhere."

He added: "Banks must act to boost their small business customers' confidence by improving regional infrastructures and restoring lending powers to local bank managers, who are in a far better position to judge risk than their centrally-based colleagues.

"We also need greater competition, both between high street banks and by allowing other, alternative funders to be able to truly compete in finance markets dominated by the banks. These measures would drive up levels of service and bring down costs."